A car purchaser demanded the cancellation of loan agreements she had taken for the purpose of financing the purchase of a car, after she was coaxed by the car dealer who served as an 'authorized representative' of the credit provider to assume obligations to the credit provider under unreasonable transaction terms when the car dealer was in a conflict of interest and hid information from her.
The Court accepted the claim and held that the credit provider was responsible for the car dealer's actions and that it must compensate the customer together with the car dealer. A company that lends money through third-party as a middleman has an increased duty of care to ensure that the borrower is aware of the terms of the transaction and its execution. In doing so, the credit provider must disclose to its customers any information regarding the existence of a conflict of interest and take into account that an innocent customer does not carefully review all the terms of the agreement, when it receives oral information from the person who submits the loan application for it and considers such person to be a representative of the credit provider. Here, the car dealer acted in a conflict of interest, inter alia, by acting as a middleman to obtain credit, concealing from the car purchaser that it was being compensated by the credit provider for the loan transactions. At the time of the termination of the transaction, the car purchaser was left with large debts due to unreasonable transaction terms and obligations to the credit provider that significantly exceed the value of the vehicle. The credit provider granted the car dealer the status of a representative on its behalf, who takes care of maximizing its profits, in a manner that exceeds technical actions of having the customer sign the loan agreement. Therefore, due to the conflict of interest in which the car dealer was in, the credit provider had an increased duty of care towards the purchaser, which it breached. Therefore, the credit provider and the car dealer are jointly and severally liable for the purchaser’s damages.